Banks must invest in innovation to keep up with IT

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Half of all banks will still lack investment for tech innovation way into this new decade, according to research.

In a new report from Gartner, the firm has predicted that 50 per cent of banks won’t have either a formal innovation programme or indeed the funding for it in 2013, which could restrict the ability for them to grow as businesses.

Richard De Lotto, principal research analyst at Gartner, said in a statement: “Pressure from governments, regulators and consumers is making some banks risk-averse and creating a culture of introversion and inflexibility.”

He added: “The predominant view of IT is that it is only useful for cutting costs so tactical thinking about automation and rationalisation overwhelms longer-term decision and strategic plans and goals.”

The report also predicts that this lack of innovation will lead to three-quarters of banks lacking the means to identify and in turn exploit potentially disruptive technologies by 2013, meaning they will lose the competitive advantage they would have with the investment.

“Banking and investment services providers need to make a critical shift to a more outward-facing set of objectives for IT that are risk-aware but still innovative and bold,” added De Lotto.

“These institutions must now look beyond the fire-fighting of the current crisis towards planning for the eventual recovery and the new world that comes with it. If they don’t, they will become uncompetitive and fall behind more-forward-thinking rivals.”

Gartner has recommended that banks focus on customer service innovation to keep up with non-banking companies like retailers and telecommunications firms who are treading their own way into the financial sector.

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